Nexa Resources S.A.(NEXA) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated net revenues for Q1 2025 totaled $627 million, an 8% increase year over year but a 15% decrease compared to Q4 2024 [21][22] - Adjusted EBITDA reached $125 million, representing a 3% decrease year over year and a 36% decrease compared to Q4 2024, with an adjusted EBITDA margin of 20% [22][23] - Mining cash cost significantly dropped to $0.11 per pound from $0.26 per pound year over year, while smelting cash cost increased to $1.17 per pound from $0.98 per pound in the same period last year [10][12] Business Line Data and Key Metrics Changes - Zinc production in Q1 2025 was 67,000 tons, down 23% year over year and 8% quarter over quarter, impacted by operational challenges and heavy rainfall [10][11] - Smelting segment sales reached 130,000 tons, a decrease of 6% year over year and 14% quarter over quarter, primarily due to lower production at certain facilities [11][12] - Aripuana's production volume declined due to intense rainfall, but metallurgical recoveries improved and costs remained within guidance [14][15] Market Data and Key Metrics Changes - The LME zinc price averaged $2,838 per ton in Q1 2025, reflecting a 16% increase year over year but a 7% decrease quarter over quarter [29] - The LME copper price averaged $9,340 per ton, up 11% year over year and 2% quarter over quarter, indicating strong market fundamentals [31] - The LME silver price averaged $32 per ounce, up 37% year over year and 2% quarter over quarter, supported by concerns around future availability [32] Company Strategy and Development Direction - The Cerro Pasco integration project is progressing well, with construction of the tailings pumping system expected to begin in Q2 2025, aimed at extending operations for over ten years [17][35] - The company is focused on improving margins through disciplined operational performance and cost control, while also enhancing production capacity at Aripuana [7][16] - Exploration remains a key pillar of the long-term strategy, with ongoing geological studies and efforts to extend the life of assets [35] Management's Comments on Operating Environment and Future Outlook - The management acknowledged the challenging macro environment marked by volatility, geopolitical tensions, and inflation, but remains confident in the medium to long-term fundamentals for key metals [6][7] - The company expects to normalize production variations over the coming quarters and is taking measures to recover production lost in Q1 2025 [48][86] - Management emphasized a disciplined approach to financial and operational strategies, prioritizing cash generation and smart capital allocation [37][86] Other Important Information - The company invested $50 million in CapEx during Q1 2025, primarily for sustaining activities, with total CapEx guidance for 2025 remaining unchanged at $347 million [23][24] - The liquidity position remains healthy, with available liquidity of approximately $721 million at the end of Q1 2025 [26] - The net debt to adjusted EBITDA ratio increased from 1.7 times to 2.1 times, primarily due to seasonal cash balance decreases [27] Q&A Session Summary Question: Can you provide more details on geotechnical issues at Vasante and production levels at Cerro Lindo? - Management explained that geotechnical issues at Vasante were due to a collapse in a high-grade mineral stope, which is being addressed to recover production [42][44] - Production at Cerro Lindo is expected to recover throughout the year, with improvements anticipated in other mines as well [46][48] Question: What are the impacts of recent trends on TCRCs and leverage expectations? - Management noted that TCs have decreased to $80, which will impact smelter profitability, but most contracts are already closed for the year [50][52] - Leverage is expected to reverse throughout the year, with targets to maintain or slightly lower leverage compared to the end of 2024 [58][59] Question: Will the negative working capital of $265 million be fully reversed this year? - Management indicated that working capital is expected to be flat on an annual basis, with a significant one-off tax payment affecting Q1 results [64][66] Question: How is the company managing tariff risks? - Management stated that they are not currently exposed to tariffs on zinc and are monitoring the situation closely, with expectations of stable demand in the U.S. market [78][80]